Below chart tells us two things:
- Top section - Nifty crossing MA(100) from above triggering SELL signal
- Bottom section - McClellan Index still above EMA(59) suggesting possible higher moves
Opposite signals, what should we do?
Nifty daily chart below shows that market is at critical support level provided by MA(50) & MA(200). Market is bearing hanging on to it and we have two possible scenarios:
- Break below support and uptrend is in serious trouble followed by next support at 4900-4800 level
- Bounce from this level and continue Up trend
Mutual Funds - For now stay invested until we see a serious breakdown, market may remain in this channel for weeks/months before any actual breakdown
Stocks/ETFs - make sure you take partial profits along the way as well as have STOP LOSS LIMIT to protect capital
Market will provide enough time to get out before any major breakdown, if that means we have to forego some gains or incur small loss, consider it as part of the doing investments. Any time when we have lot of global uncertainty then markets across the globe will experience lot of volatility. The key to avoid catastrophic losses is to have a exit plan at the right time.
A successful investor's characteristics:
- Protect capital as FIRST priority
- Be disciplined and have a plan
- Be patient and don't panic
- Stay focused
- Be informed and alert!